Fintech and social impact investing in India [interview]

Fintech and social impact investing in India [interview]

October 02 | 2018

As part of its updated strategy, Oikocredit continues to seek partnerships beyond traditional financial institutions. Partnering with fintech companies that target underserved communities with innovative financial technologies is one way the cooperative is doing this. To learn more about the role of fintech in social impact investing, and more specifically in India, we spoke with Arun Nayyar, the CEO of Oikocredit partner NeoGrowth.

What does NeoGrowth do?

NeoGrowth is a technology-enabled lending business that provides loans to under-served micro, small and medium enterprises (MSMEs) in 21 cities across India.

We pioneered a model in India that uses data from credit and debit card sales to determine the credit worthiness of small and medium retailers and to provide loans against future sales.

What is unique about NeoGrowth?

Using technology our loans can be quickly approved and require minimum documentation or credit histories. All of which is appreciated by our clients, most of whom would struggle to get loans elsewhere.

Our loans are also very flexible and we allow the customer to pay back their loan on a daily basis. The process is much easier for our clients.

In terms of social impact we focus on generating fair sustainable employment through lending. We do this by making sure that our clients work with diligent fair labour organisations to ensure that health and labour standards are being met. Empowering female entrepreneurs is also a key focus area for us.

Why did NeoGrowth decide to partner with Oikocredit?

What attracted us to work with Oikocredit was their triple bottom line approach, and namely their focus on social impact investing.

We were also impressed by the team Maanaveeya [the Indian subsidiary of Oikocredit]. We came in as the new kid on the block, and Gouri and his team really supported us with their knowledge and expertise.

Oikocredit has a really good understanding of what is going on in India. Because of which they are able to provide solid insight and guidance to their partners.

Why is fintech important for social impact investing?

There are currently 63 million MSMEs in India, employing 111 million people across the country. Traditional underwriting methods in India exclude more than 50% of creditworthy MSMEs. Most of our clients are part of this underserved group.

Access to traditional banking can also be difficult geographically speaking. India is such a broad country, you can’t take the traditional banking model and reach everyone.

Now with fintech, people don’t have to travel to get a loan anymore. Access to mobile phones is extremely easy and affordable, so with fintech people can get access to finance right away.

How is fintech growing across India and what are some of the challenges it faces?

Fintech is growing very rapidly in India right now.

India is the second largest mobile consumer in the world and statistics show that there will be approximately 650 million internet users in India by 2020.

There has also been an incredible increase of using cards vs. cash. In fact, there has been a growth of more than 50% in digital transactions and a 15% growth in ATM transactions. So the need for digital payment solutions is only going to increase.

NeoGrowth aims to be in the 100 ‘smart cities’ that the Indian government wants to build. One of the bigger challenges we face is how to build an innovative model at a large scale.

We are working hard to better segment the population and sharpen our products so that they can work across our vast and diverse country.